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For those homes with any form of unsecured lending the average debt amount is now £18,159. If the amount of any mortgage is included that value rises to £108,972.
That means that the average debt for a household with loans and a mortgage is now more than 4 times annual average income. Banks are feeling the pinch too with them writing off around £23.35m every day in bad debts.
Whilst some are seeing the green shoots of recovery many experts are still unsure as to the future of the economy and with the recent round of public spending and benefit cuts, many will find their incomes stressed even further. So what can be done if you are feeling the pinch in these tough times?
All households must have a serious review of their finances and develop a budget by which to manage expenditure. By analysing where your money goes each month you can quickly identify areas where money can be saved in the short term. Items to prioritise are the mortgage or rent, council tax and utility bills. These will keep the roof over your head. Cut out any unnecessary spending on luxury items such as health club memberships and move to a cheaper supermarket for the weekly shop. And take a list with you and only buy what is written down! Impulse spending can be a challenge so take cash and leave the credit and debut cards at home. You can't spend what you do not have.
If you have any equity in your home you may want to consider raising a secured loan to pay off all your short term store card debt. This will save money in the medium term as long as you put the cards away and pay off any spend each month in full!
There are numerous companies that now offer debt management plans and advice to help you get back in control of your finances. Independent advice from an organisation such as the Citizens Advice Bureau (CAB) will help point you in the right direction if you are unsure of what to do. Debt management plans range from informal arrangements to reduce your payments with lenders through to more formal Individual Voluntary Arrangements (IVA's) that are approved by the court. IVA's are now a recognised way for those with debts over £15,000 to get back in control over a 5 year period. Some of the loan balance may be written off at the end of the term if you keep to the plan agreed.
Posted: 02/07/2010 | Source: economicvoice.com
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Repaying debt over a longer period may increase the total amount to be repaid. We cannot guarantee a reduction in interest or charges. Initial advice is free, but if a solution is provided fees become payable. We charge your first two monthly payments plus an ongoing monthly management fee of 17.5% subject to a minimum of £30 (for payments below £100) and £35 (for payments between £101 and £200). Upfront fees cover the compilation of the draft programme, appointment of a dedicated personal account manager, communication with your creditors both in writing and by telephone, preparation of the financial statement, calculation and issue of the reduced repayment proposals plus ongoing office costs. Your creditors will not receive payments for up to two months from the start of your programme. Any payment we retain may place you further in arrears. Our IVAs are handled by The Debt People and McCambridge Duffy. Fees incurred for Individual Voluntary Arrangements are variable dependent upon the monthly contribution to the arrangement and the agreement that is reached with your creditors. Fees are made up of Nominees fees relating to assistance given to prepare your proposal and Supervisor fees which relate to the ongoing monitoring of your IVA. Fees are already included as part of your monthly contribution. The level of fees and the method of payment are both agreed by your creditors at the outset of the arrangement.If an IVA is not maintained it could lead to bankruptcy. You have a 7 day cooling off period from signing the letter of authority. If you decide to cancel, we will refund your initial payment. Upon completion of your Debt Management Plan, the last 6 months' management fees will be refunded to you.
Your ability to obtain credit will be affected in the short term and may be affected in the medium to long term. You must keep up to date with payments to your priority debts, ie; Mortgage, Rent, secured loans and utility bills. If you fall behind with your priority debts you risk losing your home.
Think carefully before securing debts on your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
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